Always act in the best interest of the Beneficiaries, not your own!
If you have been named the Trustee of a Revocable Living Trust, there are a few things you should know. As Trustee, you have a fiduciary duty to the Beneficiaries of the Trust. In other words, you should always act expeditiously for the benefit of the Beneficiaries. You should avoid any conflicts of interest, such as using the trust assets to benefit yourself, borrowing money from the trust, placing money in an account you own or investing trust money in your own company. As incredible as it may seem, newspapers are full of such stories.
As the Trustee, you have a duty to openly and regularly communicate with the Beneficiaries and not withhold information from them. Here are some things Beneficiaries should know about:
- How money in the Trust is invested
- What are the Trust assets and liabilities
- Any sales of the assets/property in the Trust
- Any expenses paid for advisers, attorneys, accountants, real estate agents, etc.
You will need to keep detailed and accurate records so that you can provide an accounting to the Beneficiaries and be prepared to defend your actions if necessary.
When a Trust terminates, you need to distribute the Trust Estate to the Beneficiaries as soon as possible and close the Trust. Depending on the objectives of the Trust and the desires of the Beneficiaries, a Trust can be terminated in as short as 6 months or it can continue for several years.
When terminating the Trust, you must pay the Trust expenses, creditor claims and administrative costs. The balance of the Trust will be distributed to the Beneficiaries in kind (give the specific asset to the Beneficiaries), or you can sell the assets and distribute cash to them.
If there is personal property belonging to the Trust, you will decide to whom the property is to be distributed. With luck, a Tangible Personal Property list has been left in the Trust, indicating to whom the items go. If not, you will decide. One way to divide up the personal property is to place items of approximate, equal value into separate piles, put numbers on them and have people draw a number and claim that pile.
When you make the distribution of the Trust, you should consider holding back a small reserve to cover any additional expenses or tax liabilities. You should talk with your accountant about the need to file a tax return for the Trust.
Once you are confident that all Trust expenses have been paid, you may distribute the reserve balance to the Beneficiaries. You may want a signed receipt from the Beneficiaries that they have received the distributed assets and that they release you from any further liability or responsibility as the Trustee of the Trust.
It’s an honor and a significant responsibility to be chosen as a Trustee—to be trusted to carry out the objectives of the Trust and protect the interest of the Beneficiaries. If you are concerned about something you don’t fully understand, we are available to answer questions.
Tom Packer is an Elder Law Attorney serving all of Southeast Idaho. As part of his law practice, Tom offers Life Care Planning to deal with the challenges created by long-term illness, disability and incapacity. If you have a question about a Senior’s legal, financial or healthcare needs, please call us.